Developed by Michael Porter, Value Chain Analysis is a ‘systematic way of studying the direct and support activities undertaken by a firm’ (Thompson, 1990. ) It identifies where the value is added in an organisation an links the process with the main functional parts of the organisation. It is used for developing competitive advantage because such chains are unique to an organisation. (Lynch, 2000) Primary Activities Inbound Logistics Inbound logistics is concerned with issues such as suppliers, storage and distribution within the company.
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ICI rely on a small number of suppliers for raw materials, mainly from the agricultural and chemical sectors, and also from the mining sector. Materials are generally available from multiple suppliers, however, if any of these suppliers were to raise prices or unable to meet demand, the Group might not be able to find a replacement supplier, therefore would be forced to pay the higher price. This in turn may result in increased prices for finished goods. It is group policy to use all raw materials efficiently, and any transfer of products internally is done so at external market prices.
ICI is also committed to working with suppliers to minimise impact on the environmental. A recently restructured and redesigned e-supply chain has meant that ICI negotiate contracts globally through use of the Internet. Operations Operations are concerned with issues affecting the production area. The Group currently owns over 200 manufacturing sites (Annual Report 2001). They are however, committed to reducing costs throughout the whole organisation therefore there has been closures of loss making stores, and surplus manufacturing sites.
The group is also trying to be more energy efficient per tonne of production. (They are aiming to reduce this. ) A Product Stewardship Program has been developed which has effect on impact of production. The program has outlined product regulatory requirements, societal pressures, reduces the risk of harm to people and theenvironmentThe groups SHE strategy is concerned with the safety, healthand the environment of its people and products. Some aims of the programme include reducing workplace injuries by 50% (www. ici. com). Outbound Logistics
Outbound logistics are how the final products are distributed to the customers. Product Stewardship Program ICI provides the relevant information to enable correct usage and disposal of products. The successful use of the Internet in the Paint division has meant that National Starch has now introduced it. As well as lowering costs for the Group, it enhances customer service levels. The Group is committed to focussing on major customers (a customer orientated supplier) which has resulted in a strengthened product pipeline with global companies. Marketing and Sales
Marketing and sales analyse customers wants and needs and how products are brought to the attention of consumers. Products are sold through an extensive network of subsidiaries, associates and distributors. Quest, National Starch and Performance Specialities are sold mainly by direct sales forces, distributors and alliances. Paints are sold through a range of distribution channels including independent retailers and stores, and the Groups own retail premises. Coatings for cans in thefoodand beverage sector are supplied directly to the manufacturer.
Regional and Industrial businesses market their products directly or through independent merchants, wholesalers and distributors. There a high degree of competition in the marketing of products world wide so it is likely that the maincommunicationmethods used by the company are personal selling by sales force, trade associations and shows, direct marketing and advertising in business publications and in horizontal and vertical publications. (Hutt, 2000) Support Activities Procurement ICI has controlled access to online catalogues of their approved suppliers.
With terms and conditions already pre-agreed, ICI’s buyers can easily log on and make any necessary purchases in real -time, whether they are in the UK or overseas. The US Paint division use a program called Aspen Buy to automate the procurement process and source raw materials via the Internet for its US operations. ‘For the first time in the chemicals industry, this Internet-based procurement solution goes beyond basic online transactions to include the important collaborative business process, vendor managed inventory (VMI).
VMI will enable ICI Paints to work in partnership with its key suppliers to achieve maximum efficiency in the supply chain. ‘ (www. aspentech. com) Human Resource Management The company’s vision is based upon inspiring and developing outstanding people and is therefore committed to equal opportunities andcultural diversity. A Company Code of Business Conduct was launched in 2000, and states that company policy is to ‘treat individuals in all aspects of employment solely on the basis of ability irrespective of race, religion, colour, age, disability, gender, sexual orientation or martial status.
‘ The company also strongly believes that knowledgeable and well informed employees are essential to its success and there should be channels of communication and opportunities for consultation and dialogue on issues that affect business performance and employees working lives. (Annual Report, 2001) ICI has introduced a human resources information system (HRIS) programme aimed at significantly improving people processes.
The HRIS programme is closely aligned with ICI’s business improvement plans for overall HR processes. It is not centred on administrative HR metrics but is core to ICI’s forward thinking in HR to deliver real improvement in the key HR process areas such as Performance Management, Learning andEducationand Reward Management. In particular the competency management programme will guarantee effective management of all ICI businesses and ensurecareerdevelopment for every one of its employees.
Management level support has been crucial to the success of the project. Widespread support and funding from HR Directors within ICI’s international businesses have been instrumental in seeing this project towards its ultimate conclusion — a global roll-out of PeopleSoft HRMS. (http://www5. peoplesoft. com) Technological Development Each of the four business units is responsible for its own R&D resources and for driving innovation to meet the needs of its consumers.
R; D teams are complemented by a central R; D resource that aims to provide world class capabilities that are more common to most businesses. The Groups distributedtechnologynetwork draws on expertise across the company allowing new products and processes to be developed more rapidly. The groups prime technology areas include biosciences, chemistry and catalysts and materials. They are committed to innovation with lower environmental impact, as this is a key aspect of sustaining competitive advantage.